Jet Makers Pursue Distinct Paths -- WSJ
27 October 2016 - 6:03PM
Dow Jones News
Boeing says it will focus on landing new sales; Airbus targets
delivering more planes
By Doug Cameron and Robert Wall
The world's two largest aircraft makers laid out divergent
year-end goals Wednesday as Boeing Co. said it needs to land new
sales, while Airbus Group SE indicated that it would deliver more
jets.
Both companies are under pressure from investors to deliver on
their orders of 10,000 jets valued at more than $1.5 trillion and
maintain the momentum of fresh deals.
Boeing Chief Executive Dennis Muilenburg said the company, which
reported forecast-beating third-quarter profit, remains committed
to its goal of boosting margins to about 15% by the end of the
decade from around 10% now.
The plane maker needs, however, to find more buyers for its
widebody jets, especially the 777.
Sales of twin-aisle planes that typically have higher profit
margins have been sluggish this year as airlines in Asia and the
Middle East dialed back on expansion plans.
Boeing has won new orders for just 17 of its existing 777 jets
this year, pushing the backlog to around 150.
Mr. Muilenburg said 777 output could be cut to 42 a year in 2018
after already announcing a reduction to 66, unless it closes some
key sales campaigns in the next two months. It currently turns out
100 a year.
A decision to increase production of the smaller 787 jet hinges
on making additional deals in the next six months, Mr. Muilenburg
said.
The profitability of both jets is crucial to Boeing's long-term
plan. The company still expects to generate about $10 billion in
cash in 2016 and increase that amount in subsequent years, he
said.
Boeing shares reversed an early loss Wednesday and closed up
4.7% at $145.54, after hitting their highest level this year.
Deals for single-aisle jets have been far more robust. Boeing
still plans to boost output of the 737, and demand outstrips even
the peak of the 57 planes a month it expects to build in 2019, Mr.
Muilenburg said.
Meanwhile, production at Toulouse, France-based Airbus has been
hobbled by delays in securing seats and engines for some jets. The
company must overcome these obstacles to deliver on pledges to
investors.
Airbus on Wednesday said it would push more than 208 planes out
the door in the fourth quarter, an unusually large number,
including almost doubling delivery of its new A350 long-range
jet.
To meet its profit goals, Airbus plans to ship more than 670
jetliners this year, at least 20 more than initially promised.
Boeing aims to deliver as many as 750 planes in total this
year.
Airbus must get those planes into customer hands to generate
more than EUR5 billion, or nearly $5.5 billion, in cash in the last
three months of the year. It has committed to generate about EUR1.2
billion in cash this year, and ended the third quarter with about
EUR4.7 billion in cash out the door.
"For the remaining months of the year we remain totally focused
on deliveries to achieve our earnings and cash guidance," said
Airbus Chief Executive Tom Enders.
Airbus investors had been anxious that delays on the A350 and an
updated version of the company's popular single-aisle plane, called
the A320neo, would cause earnings to fall short.
The company reported a 21% drop in its closely watched
adjusted-earnings measure to EUR731 million. Net income in the
period plummeted 87%, to EUR50 million from EUR736 million, which
Airbus attributed to a higher effective tax rate.
Airbus shares closed up 3.8% at EUR55.40 on Wednesday.
Boeing's third-quarter profit rose to $2.28 billion from $1.7
billion, with per-share earnings climbing to $3.60 from $2.47. A
tax gain outweighed a charge on a space taxi being developed for
the National Aeronautics and Space Administration.
Revenue slipped 7.5% to $23.9 billion, and though Boeing boosted
its full-year guidance slightly, sales are expected to be flat or
slightly down in 2017.
Write to Doug Cameron at doug.cameron@wsj.com and Robert Wall at
robert.wall@wsj.com
(END) Dow Jones Newswires
October 27, 2016 02:48 ET (06:48 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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